Michael Burry Says Nvidia's 'Avalanche' Of AI Chips Is The Real Story - Here's What Investors Should Watch

(MENAFN- AsiaNet News)

• Burry said clues about Nvidia's fallout were there all along over the past year.
• He reposted an excerpt from a recent Wall Street Journal report saying Huang had internally discussed that major cloud providers were moving away from the company.
• Nvidia shares rose 1% in premarket trading on Friday, after a six-session slide.

“The Big Short” investor and noted Nvidia critic Michael Burry said on Friday that Nvidia was facing an“avalanche” of AI chips before CEO Jensen Huang's affair with a suspected Chinese spy and his ultimate removal from the post triggered a company crisis.

“The real story is that the AI Bubble started to come apart for real this year. The fallout is just starting now, but the clues were in NVIDIA's stock price, in the financing the bubble, in the SEC filings, in the regulatory filings, and here and there, almost all year long,” Burry wrote in a blog post.

Burry reposted an excerpt from a recent Wall Street Journal report that said Huang had internally discussed that major cloud providers were moving away from the company, planning to use alternative chips and lessen their reliance on the firm. 

At the time, Huang also questioned whether the company's billions of dollars of investment in the AI infrastructure value chain had gone too far, according to the Journal. Even worse, Huang reportedly said, the vast supply of chip wafers and memory Nvidia had committed to buying was coming at him like an“avalanche.”

Nvidia share rose 1% in premarket trading on Friday, after a six-session slide.

GPUs Are Not Great For AI, Says Burry

Burry argued that Nvidia's strength may have been tied to a moment in time as GPUs bring costs and capacity many AI workloads don't need.“GPUs were not originally designed for AI tasks,” he wrote, adding that they are“already overkill” for much inference and small language model training.

He also questioned analysts'“rosy” forecasts that fueled high expectations for the company.“Their job is to predict rosy numbers. Never forget,” he said.

“The paradigm shift that caused the 'avalanche' of worries in Jensen Huang was predictable, and NVIDIA operationally leveraged into it anyway. That is one of several long-term problems for NVIDIA, including the duration mismatch I have discussed,” Burry wrote.

The investor added that he has no direct exposure to NVDA stock, and owns VanEck Semiconductor ETF (SMH) puts and NASDAQ 100 puts.

Huang's Exit

Huang, 63, admitted to being unfaithful to his wife over the weekend and, since then, has been linked to at least three women, including former Megaspeed executive and suspected Chinese spy Alice Huang and two subordinates at Nvidia. Nvidia on Thursday named CFO Colette Kress interim CEO while it searches for a permanent replacement and investigates Huang's conduct.

Huang looked broken and shattered, his legendary energy depleted, and he had started using phrases like“whatever” and“I don't care” in the few weeks leading up to his resignation on Thursday, Bloomberg reported. He even called himself a“piece of sh--” at one point, according to the report. 

Three House committees have directed Huang to appear for closed-door testimony on Dec. 1, or risk subpoenas, according to an X post by the Select Committee on China. Earlier in the day, CNBC reported Huang had agreed to testify before Congress before Thanksgiving.

NVDA stock lost 11% in the week through Thursday's close, though retail sentiment on Stocktwits has held in the 'extremely bullish' zone.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

 

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